Summary of Board decisions are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions are included in an Exposure Draft for formal comment only after a formal written ballot. Decisions in an Exposure Draft may be (and often are) changed in redeliberations based on information provided to the Board in comment letters, at public roundtable discussions, and through other communication channels. Decisions become final only after a formal written ballot to issue an Accounting Standards Update.

December 21, 2010 FASB Board Meeting

Fair value measurement

Application of Proposed Amendments to Topic 820 by Nonpublic Entities

The Board tentatively decided not to permit exceptions for nonpublic entities to the fair value principles and concepts applicable to the measurement of fair value in the amendments to Topic 820, Fair Value Measurements and Disclosures.

The Board tentatively decided that the amendments to Topic 820 will require nonpublic entities to disclose the following:
  1. The current use when a nonfinancial asset is measured subsequently at fair value and the highest and best use of the asset differs from its current use as well as the reasons why the asset is being used in a manner that differs from its highest and best use. The Boards also tentatively decided to require that disclosure only when the asset is recognized at fair value in the statement of financial position, not when the fair value is disclosed.
  2. For assets and liabilities categorized within Level 3 of the fair value hierarchy that are measured at fair value in the statement of financial position on a recurring basis after initial recognition:

    1. A quantitative disclosure of the unobservable inputs and assumptions used in the measurement
    2. A description of the valuation processes in place.
The Board also tentatively decided that, as a result of the amendments to Topic 820, nonpublic entities will not be required to disclose the following:
  1. The level in which a fair value measurement would be categorized within the fair value hierarchy for assets and liabilities not recognized at fair value but for which disclosure of fair value is required

  2. Transfers between Levels 1 and 2 of the fair value hierarchy

  3. A qualitative discussion about the sensitivity of a Level 3 fair value measurement to changes in unobservable inputs and any inter-relationships between those inputs that magnify or mitigate the effect on the measurement.

Accounting for financial instruments: classification and measurement. The Board discussed risks inherent in financial instruments, how an entity manages those risks, and whether disclosures about those risks should be required in the financial statements. The Board requested the staff to review risk disclosures currently required by various regulatory and accounting bodies and to obtain feedback from users and preparers to develop risk disclosures related to an entity’s involvement in financial instruments. However, the Board did not decide whether to include those risk disclosures in the final Accounting Standards Update that will be issued for this project or to issue a separate document for those risk disclosures.

The Board also discussed the primary measurement attributes for financial assets and the criteria for classifying and measuring financial assets. The Board decided to consider amortized cost as an alternative primary measurement attribute to fair value for certain financial assets. The Board decided that both the characteristics of a financial asset and an entity’s business strategy for the financial asset should be used as criteria to determine the classification and measurement of financial assets. The Board decided that the business strategy criterion for classification and measurement purposes should incorporate the level of market activity for a financial asset.